Barney Frank Pushes for Regulation Despite Financial Industry Funds

Position: As chairman of the House Financial Services Committee, Barney Frank is busy this year in ways he may not have expected when he assumed the post in 2007, just before the country’s economy slipped into a recession. Since 2003, the Massachusetts Democrat had been the ranking member of the committee, which has jurisdiction over the housing and financial sectors. He’s served in Congress since 1981. Money Summary: Of the $9.4 million Frank has raised since 1989, he’s spent $9.1 million. While his Republican opponent in the 2008 race, Early Sholley, raised a mere $40,250, Frank collected $2.2 million — $1.7 million more than the average House incumbent during the 2008 election cycle. Frank won with 68 percent of the vote. Boston residents have given him more money than any other metro area, at $1.9 million, with Washington, D.C., and New York City in distant second and third places respectively. Campaign Donors: Frank’s promotion from ranking member of the House Financial Services Committee to chairman helped earn him about 37 percent more from the industries footing his campaign bills compared to the 2006 election cycle and 118 percent more compared to the 2004 election cycle, when there was no indication he’d be chairman. In the 2004 election cycle, the finance, insurance and real estate sector gave Frank $469,800. In 2006, the sector gave him $746,300. And during the 2008 election cycle, when he was chairman, he collected $1 million from the sector. So far this year, Frank has collected $387,750 from the sector, bringing its total contributions to Frank since 1989 to $3.1 million. That’s one-third of all funds Frank has brought in during that time from all sectors, making it his most generous sector by far. So far this year he’s the industry favorite for hedge funds among members of the House. That industry has given him $20,300. Insurance companies, too, have supported Frank more than many other lawmakers, contributing $119,600 to him.

On Financial Regulation: Despite Frank’s financial ties to the sector, he hasn’t been shy this year about pushing reform. Four major bills make up Frank’s version of financial regulatory reform. Under his leadership, the House Financial Services Committee passed legislation creating a new consumer watchdog agency, the Consumer Financial Protection Agency, endowed with the power to regulate a number of financial tools that have always enjoyed relative freedom from government control. The committee also passed legislation to regulate derivatives, which are supposed to reduce financial risk but have been blamed, in part, for the economic crisis. Frank also recently criticized banks for charging overdraft fees on debit card transactions without first alerting customers. “We wouldn’t be in a situation where we’re considering this legislation if you would have had an opt-in regime from the beginning,” Frank said to the banking industry at a hearing. “Don’t do people favors without asking them.”

Frank supports a bill that the House passed that would prevent credit card companies from increasing interest rates and fees before legislation that passed this spring goes into effect. The legislation that already passed limits when and how banks can charge borrowers. The congressman said the move was both “real, and a lesson to” the industry. But Frank hasn’t been hard on everyone in the financial industry. He advocated an amendment exempting small banks from oversight by the Consumer Financial Protection Agency.

Frank changed his mind on a contentious bill over how to handle big financial institutions that fail and potentially endanger the country’s economic well being, a la American International Group and Citigroup. At first, he supported a system in which taxpayers would save those firms and the companies would be expected to pay that back in fees in the following years. Recently, however, he announced that he supports requiring financial firms with more than $10 billion in assets to pay into a fund designed to avoid a fiscal crisis, much like insurance works.

Industry Favors: “Even before Chairman Frank took helm as chairman, he was a huge proponent of affordable housing and that is an NAR [National Association of Realtors] priority,” said Mary Trupo, public issues director for NAR. “The relationship with him began a long time back and it has strengthened over the past few years as we’ve talked about reforming FHA [Federal Housing Administration] to make it a more viable product for families. And we’re very much in line with the chairman’s stand on the stimulus package and the use of the TARP [troubled asset relief program] dollars.”

Invests in: In 2008, Frank’s estimated worth was $972,150, which is less than the net worth of 174 other members of the House. His investments are almost entirely held in the form of bonds. It also appears he’s taken an interest in social investing, putting $111,050 in a Calvert Social Investment fund.

Other Money Matters: Critics of the lawmaker have said Frank was too lax on regulating Fannie Mae and Freddie Mac, leading, in part, to the subprime mortgage crisis that has been so damaging to the economy. They pointed to the $42,350 in campaign contributions Frank has received from Fannie Mae and Freddie Mac since 1989. They also note his former domestic partner’s position as a Fannie Mae executive as evidence that he was swayed to oppose regulation of the two giant mortgage lenders. But Frank has continuously supported developing the Federal Housing Finance Agency to oversee the lenders.

In His Own Words: “We are going to reform securitization with some risk retention,” Frank said during a House Financial Services Committee hearing about dealing with failing firms that could damage the nation’s economy. “We are restricting irresponsible subprime loans, we are regulating derivatives, there will be no unreported, no unregistered large enterprises going forward; we will have the ability to significantly increase capital requirements more than proportionally.”

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Viveca Novak
(202) 354-0111
press@crp.org

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